While both FuelEU Maritime and the EU Emissions Trading Systems (ETS) regulations aim to reduce emissions in the maritime sector, their methodologies, scopes, and impacts on shipowners differ considerably – however, one thing they have in common is the significant role they will play in the future of shipping.
To ensure compliance with both regulations, it’s crucial that ship owners and operators understand their key differences.
Firstly, EU ETS regulations can be considered a financial measure, while FuelEU is regarded as a more technical measure. This is because EU ETS has a ‘tax’ on emissions in the form of emissions allowances (EUAs), whereas to be in line with FuelEU, vessels must attain specific greenhouse gas (GHG) intensity indices to be deemed compliant.
Secondly, the two frameworks have different approaches to fuel lifecycles. EU ETS focuses on the tank-to-wake part of the fuel’s lifecycle, meaning that the emissions generated are calculated from the moment fuel is on the vessel until consumption. In contrast, FuelEU focuses on a well-to-wake basis, considering the full lifecycle of the fuels.
Thirdly, if the necessary EUAs are purchased or received and surrendered to authorities in due time, the owner will comply without any extra measures. With FuelEU on the other hand, shipowners must actively participate by procuring alternative fuels that could assist the vessel in attaining the required annual GHG intensity indices. To meet the stringent GHG intensity targets set by FuelEU, shipowners must transition to alternative fuels. While it is unclear which alternative fuel will be the front-runner, several viable options are emerging, leading the way to a multifuel future.
As we speak, several shipowners are exploring biofuel options as the most practical alternative to fossil fuels – not least because they can replace conventional marine fuels like gas oil and fuel oil without requiring ‘major’ modifications to existing ship engines and infrastructure. Second-generation biofuels, derived from waste and residues, offer an 85 – 95% reduction in emissions, making them highly promising for maritime applications.
LNG is also gaining popularity for its ability to reduce carbon dioxide emissions by up to 23% on an entire lifecycle basis. In its fossil version, LNG will comply with FuelEU regulations until 2040. With wide availability through existing and expanding global bunkering infrastructure and proven vessel technologies, LNG has already started decarbonising shipping. It provides a competitive pathway to net-zero green GHG emissions by using bio-LNG (FuelEU compliant until 2050), and eventually e-LNG.
The failure to comply with either of the regulations will undoubtedly result in hefty fines and could tarnish a company’s reputation. In addition, non-compliant parties could face further issues, such as a potential expulsion policy from EU ports that could affect the single under-complying vessel and spread to other ships of the same entity.
Despite their differences, the two frameworks work in the same direction: diminishing and eliminating GHG emissions.
These regulatory additions have started to affect shipping companies. And the impact will accelerate following the upscaling of the EU ETS to 70% in 2025 and the commencement of FuelEU in January 2025.
Due to the complexity of EU ETS and FuelEU regulation, shipowners realise they will benefit from investing in digital emissions monitoring and management tools to mitigate non-compliance risk. These digital solutions enable real-time emissions tracking, lifecycle fuel assessments, and voyage estimation and optimisation, ensuring operators remain within the prescribed GHG limits.
Tools such as Baseblue’s Fuelink platform provide valuable support by allowing vessel monitoring, assisting with fuel strategies by running scenarios on various voyages, and helping operators optimise fuel use and emissions reduction strategies. Baseblue’s consultants can offer guidance on compliance strategies, allowing shipowners to minimise their exposure to penalties while maintaining operational efficiency.
Taking proactive measures, planning with digital tools, and collaborating with experts will ensure that ship owners achieve compliance while safeguarding competitive advantage.
